Sara Senatore

Sara Senatore from Bank of America inquired about the dynamics of beef inflation, questioning why it has surprised to the upside in 2025 after surprising to the downside in the prior year. She asked about the role of retail demand and supply constraints, and whether the forecasted Q3 peak was a matter of timing.

Answer

Michael Bailen, Senior Director & Head of IR and Financial Analysis, explained that the higher inflation guidance is due to resilient retail demand for beef combined with a tightening supply situation as producers cut back. He noted that costs rose in June, which will impact Q3 results, and confirmed the company has locked in 80% of its beef for Q3 and 50% for Q4.

Sara Senatore asked for clarification on Texas Roadhouse's pricing strategy relative to commodity and wage inflation, and inquired about the drivers behind the recent improvement in sales mix.

Answer

Executive Michael Bailen confirmed that the company's menu pricing is currently below its inflation guidance, which is a typical approach for them. He explained that the positive mix shift seen in the first five weeks of Q2 was driven by improvements in the entree and appetizer categories, while the alcohol mix remained slightly down.

Sara Senatore of Bank of America requested a breakdown of the Q4 comparable sales components (traffic, price, mix) and asked about the maturity curve for new Texas Roadhouse and Bubba's 33 restaurants.

Answer

Executive Michael Bailen detailed the 7.7% Q4 comp growth, comprised of 4.9% traffic and a 2.8% check increase, which implied a 30 basis point negative mix due to lower alcohol sales. He confirmed that both Texas Roadhouse and Bubba's 33 experience a similar maturity pattern, with high opening volumes during a 'honeymoon' period, followed by a slight dip before entering the comp base and beginning to grow year-over-year.

Sara Senatore asked for clarification on the double-digit increase in high-income traffic, questioning if it indicates an acceleration or trade-down. She also inquired about the International Developmental Licensed (IDL) segment, specifically if China's market performance was positive despite macroeconomic pressures, given reports of improvement from other consumer companies.

Answer

CFO Ian Borden clarified that the high-income consumer trend is not an acceleration but a continuation and even extension of the bifurcated consumer environment in the U.S., with low-income traffic down high single-digits and high-income traffic up high single-digits. Regarding IDL, he confirmed that all geographic regions, including China, delivered positive comparable sales growth. Chairman and CEO Chris Kempczinski added that McDonald's is gaining share in China despite overcapacity and a 'delivery war' putting pressure on pricing, but the business is growing comparable sales and on track with new unit development.

Sara Senatore asked for two clarifications: first, whether the double-digit increase in high-income traffic was an acceleration or evidence of trade-down; and second, if China's market within the International Developmental Licensed (IDL) segment was not positive in comparable sales, given reported pressures despite overall IDL strength.

Answer

CFO Ian Borden clarified that the high-income consumer trend is not a change but a continuation and even extension of the bifurcated consumer environment, with low-income traffic down high single-digits and high-income up high single-digits. He reiterated McDonald's goal to meet the needs of all consumers. Regarding IDL and China, he stated that the macroeconomic environment in China remains challenging in the short term, but the long-term opportunity and confidence remain unchanged. He confirmed that all geographic regions in IDL, including China, delivered positive comparable sales. CEO Chris Kempczinski added that McDonald's is pleased with China's performance and is gaining share, despite overcapacity and a delivery price war leading to a deflationary pricing environment. He confirmed that the business is still growing comparable sales and is on track with new unit openings.

Sara Senatore asked two clarifying questions: first, whether the weakness in the middle-income consumer persisted from Q1, and second, how to reconcile the significant frequency lift from loyalty members with the overall decline in U.S. transactions.

Answer

Chairman & CEO Chris Kempczinski provided direct answers. He stated that the middle-income consumer's trend improved in Q2, turning slightly positive. Regarding the loyalty program, he explained that its positive impact is not yet large enough to offset the double-digit transaction declines from the low-income consumer segment, to which the QSR industry over-indexes. He noted the loyalty program currently represents about a quarter of the U.S. business, highlighting the significant growth opportunity.

Sara Senatore asked for clarification on the U.K. market's performance and whether U.S. QSR traffic declines were due to consumers shifting to other segments like fast-casual.

Answer

CEO Christopher Kempczinski clarified that the U.K. is not yet gaining share and the issue is execution against existing competitors, not new ones. Regarding the U.S., he asserted that traffic declines are due to consumers cutting back on visit frequency, particularly for breakfast, rather than a significant shift to other dining segments. President, IOM Ian Borden added that they are confident in their ability to turn around the U.K. business, drawing on learnings from France.

Sara Senatore asked about the apparent disconnect between strong digital and loyalty growth, which typically have higher checks, and the muted overall same-store sales growth. She also requested details on the performance issues in the U.K. market.

Answer

CEO Christopher Kempczinski addressed the U.K., citing consumer pressure, aggressive local competition on value, and subpar marketing execution in the second half of 2024 as key challenges. CFO Ian Borden explained that overall check growth is affected by moderating pricing and strategic value adjustments, but affirmed that loyalty programs are driving frequency and higher spending over time. He pointed to France as an example of successfully driving both guest count and check.

Sara Senatore asked for clarification on whether the $5 meal deal's average check was creating negative mix, and if lower company-operated margins were affecting franchisee sentiment on new unit development.

Answer

CFO Ian Borden explained that while the value meal's check is slightly below average, it is offset by pairing it with full-margin promotions that drive traffic and higher overall spend. He attributed lower McOpCo margins to cost pressures and muted sales, viewing it as a short-term investment. CEO Christopher Kempczinski added that new unit returns remain strong and he sees no impact on development goals.

Sara Senatore asked about the impact of the kitchen display system (KDS) technology rollout on consumer perception, frequency, speed of service, and throughput, especially when demand slows.

Answer

Brett Schulman, CEO, explained that the KDS significantly improves order accuracy, which is CAVA's biggest opportunity for customer experience, leading to higher guest satisfaction scores and improved comps. He noted its role in enhancing off-premises channels through better integrations, throttle management, and proactive order status notifications, all aimed at using technology to enhance, not replace, the human experience.

Sara Senatore asked about the impact of the new Kitchen Display System (KDS) technology, specifically on consumer perception, frequency, speed of service, throughput, and guest frequency, noting that detecting throughput can be challenging when demand slows.

Answer

CEO Brett Schulman explained that KDS plays a crucial role in off-premises channels by improving order accuracy, which is CAVA's biggest opportunity for customer experience, and by easing production. He noted that restaurants with KDS are experiencing higher guest satisfaction scores, which historically correlates with increased comps. The technology aims to enhance the human experience by equipping team members and providing proactive order status notifications.

Sara Senatore from Bank of America sought clarification on the 'honeymoon period' for new stores and asked if the limited-time Harissa meal was intended to be a value-oriented offering.

Answer

CEO Brett Schulman clarified that the Harissa meal was a brand-building exercise focused on emotional connection, not value. CFO Tricia Tolivar explained that the 'honeymoon effect' involves some exceptionally high-volume 2024 stores posting negative comps as they normalize, impacting the overall same-store sales calculation.

Sara Senatore from Bank of America inquired about the demand environment, noting that Q1's 3-year sales stack exceeded the full-year outlook, and asked if CAVA is seeing any softness in specific dayparts or regions as mentioned by peers.

Answer

CFO Tricia Tolivar stated that while the guidance reflects macro uncertainty, CAVA's Q1 data shows no signs of consumer weakness. She confirmed positive traffic across all geographies, income levels, and dayparts, with lower-income strata even outperforming. The reiterated 'high 30s' 3-year stack guidance for the full year accounts for lapping the successful steak launch in the second half.

Sara Senatore asked about the 'honeymoon period' for new restaurants, questioning if it's observed across different markets and if it signals anything about brand awareness. She also inquired if brand awareness has reached a critical mass or if significant opportunity still exists.

Answer

SVP and CFO Alex Kaleida clarified that the 'honeymoon period' was unique to 2024, stemming from strong openings in 'flavor deserts' in new markets, and is not a consistent dynamic this year. He stated that Wingstop still has a more than 20% gap in brand awareness compared to larger, more mature QSR brands, with an even larger opportunity in consideration, which the Smart Kitchen and consistency improvements aim to address.

Sara Senatore inquired about the 'honeymoon period' for new restaurants, asking if this phenomenon is observed across different market types and if it signals anything about brand awareness. She also questioned whether brand awareness has reached a critical mass or if significant opportunity still exists.

Answer

SVP and CFO Alex Kaleida clarified that the 'honeymoon period' was more unique to 2024, driven by opening in 'flavor deserts' where initial sales were exceptionally strong. He stated that Wingstop still has a more than 20% gap in awareness compared to larger QSR brands, with an even larger gap in consideration, indicating significant opportunity remains.

Sara Senatore noted that positive transaction growth implied a negative average ticket and asked for the drivers, such as mix shift to individual occasions, less attachment, or value promotions. She also questioned if the stable 2-year sales stack was a better indicator for future trends than the 3-year stack.

Answer

Executive Alex Kaleida attributed the negative ticket directly to the mix shift towards individual-eater occasions from the newly launched tenders, which have a smaller ticket size than group orders. He confirmed it was not driven by value promotions. On the sales stack question, he reiterated that the company is focused on the 3-year stack, which is expected to be in the high 30% range in the second half, consistent with their full-year guidance.

Questioned the drivers behind the negative ticket growth implied by positive transaction growth, and asked for clarification on whether a 2-year or 3-year sales stack is more indicative of the underlying trend.

Answer

The negative ticket was driven by a mix shift towards individual-eater occasions from new customers purchasing tenders, which have a lower average check than traditional group orders. This is a dynamic similar to the chicken sandwich launch and is not related to value promotions. For forward-looking trends, the company guided analysts to focus on the 3-year stacked comp for the second half of the year.

Sara Senatore asked about the drivers behind the negative ticket in Q1, given the positive transaction growth. She also questioned the comp stack methodology, suggesting a 2-year stack might be more indicative of the trend than a 3-year stack, and asked about the cadence through Q2.

Answer

CFO Alex Kaleida attributed the negative ticket directly to a mix shift toward individual-eater occasions driven by the tender relaunch, which carry a lower average ticket size than group orders. He confirmed it was not due to value-driven promotions. On the outlook, he reiterated that management is focused on the 3-year stack for the second half, which their guidance implies will be in the high 30% range.

Inquired about potential cannibalization from accelerated unit growth and the rationale for choosing a share repurchase program over a special dividend for capital return.

Answer

The company sees no evidence of cannibalization from new unit growth, noting that new stores are opening with very high productivity and there is significant white space for expansion. The decision to use a share repurchase program was driven by the belief that it is the best way to maximize long-term shareholder value, given the compelling value of the stock.

Sara Senatore questioned if the long-term international target of 4,000+ units is conservative given the new 750-unit agreements. She also asked for more detail on the new NBA partnership and what management meant by unlocking new opportunities.

Answer

Executive Alex Kaleida stated that the 4,000+ unit target did contemplate these expansions but has a "plus sign for a reason," indicating no ceiling has been found. CEO Michael Skipworth detailed that the NBA partnership will drive awareness through presence at key events like the All-Star game, in-game branding, social media content, and access to NBA talent for custom TV spots.

Sara Senatore asked Chipotle to reconcile the perception of fast casual as 'unaffordable' with the company not losing restaurant wallet share to QSRs or casual dining. She also inquired about any observed differences in daypart performance, such as lunch versus dinner, and how Chipotle plans to communicate its value proposition without explicitly stating a price point.

Answer

Scott Boatwright (CEO) stated that dayparts are holding consistently at roughly 50/50 for lunch and dinner. He acknowledged some 'unaffordable' remarks from a problem detection study but questioned if Chipotle is being lumped in with other $15 fast-casual concepts, emphasizing the goal to communicate Chipotle's value (around $10) without disparaging competitors. Regarding value communication, Scott mentioned testing an ad that showed abundance and culinary quality, but consumers missed the specific price point message, focusing instead on innovation and uniqueness. He indicated that new ad campaigns and strategies are being developed for 2026 with external agencies.

Sara Senatore asked Chipotle to reconcile the perception of fast casual as unaffordable with the company's stable market share, inquiring where this feedback originates. She also asked if there were any observed differences in daypart performance, specifically between lunch and dinner.

Answer

CEO Scott Boatwright confirmed that dayparts are holding consistently at roughly 50-50 for lunch and dinner, with no meaningful shift. He acknowledged that some feedback from their problem detection study indicated the brand was perceived as unaffordable, but clarified that Chipotle is not losing customers to competitors but rather to grocery/food at home. He emphasized the challenge of communicating Chipotle's extraordinary value (around $10) without disparaging competitors or using direct price-point ads, noting that past tests showed consumers missed the price message, focusing instead on innovation and culinary uniqueness.

Sara Senatore of Bank of America inquired about new store productivity and questioned whether the recent marketing and LTO push was yielding diminishing returns, suggesting potential consumer fatigue.

Answer

CFO Adam Rymer confirmed that new store productivity remains strong, holding slightly above 80%. CEO Scott Boatwright clarified that the summer marketing campaign was a pre-planned test to gain learnings for future years, not a reaction to market conditions, and that the company successfully gathered insights to inform its 2026 calendar.

Sara Senatore questioned whether the consumer slowdown was a fundamental shift or a result of difficult comparisons, given the stable two-year sales stack. She also asked for clarification on the planned increase in marketing spend.

Answer

CEO Scott Boatwright stated the slowdown is a combination of factors, including consumer economic uncertainty, weather, and tough comparisons. He confirmed a plan to meaningfully increase marketing spend over the summer, focusing on ROI through digital and social channels to maintain relevance.

Sara Senatore of Bank of America inquired about the full-year 2025 pricing outlook without additional price hikes and sought clarity on the drivers behind the better-than-expected Q4 food costs, including the role of supply chain benefits and potential tariff impacts.

Answer

CFO Adam Rymer stated that 2025 pricing is expected to be around 2% with no additional increases assumed, factoring in the December price action and the April FAST Act price rolloff. He attributed the Q4 cost of sales beat to a less severe step-up in avocado prices than anticipated. CEO Scott Boatwright added that the supply chain team has diversified avocado sourcing, with only about 50% now coming from Mexico, mitigating potential tariff impacts.

Sara Senatore sought clarification on the Q4 comparable sales outlook, questioning why the carne asada comparison was considered tough and whether traffic was expected to slow. She also asked if new technology would create a step-change improvement in restaurant throughput.

Answer

Interim CEO Scott Boatwright clarified that traffic trends are accelerating into Q4, even against a successful carne asada promotion last year, driven by strong product, marketing, and operational execution. He confirmed that new technologies, like the produce slicer, are expected to create a significant improvement in throughput by enabling teams to finish prep on time and deploy more effectively during peak hours. CFO Adam Rymer added that expo execution improved from 50% to 60% of restaurants.

Sara Senatore asked about the rationale behind the recent coffee house closures, specifically whether they were due to lower average unit volumes (AUVs) or higher costs, and the impact on sales transfer. She also questioned the long-term margin implications, considering lower restaurant-level margins but reduced G&A, and if operating margins could return to pre-COVID levels.

Answer

Cathy Smith, EVP and CFO, explained that closures were based on both customer experience and financial viability, resulting in a slightly accretive impact on profitability due to their unprofitability. She stated that top-line revenue is the biggest factor for a coffee house's viability. Sales transfer from closed stores was higher than expected. She deferred a complete financial algorithm and picture to the upcoming investor day in January, emphasizing the need for great returns and strong top-line sales from future coffee houses.

Sara Senatore asked for clarification on the rationale behind coffee house closures, specifically whether they were due to lower average unit volumes (AUVs) or higher costs, and the expected impact of sales transfer and long-term margin implications for the business.

Answer

Cathy Smith, EVP and CFO, Starbucks, explained that closures were based on both customer experience standards and financial viability, primarily driven by insufficient top-line revenue. She noted that the closures are expected to be slightly accretive to profitability and that sales transfer to nearby stores has been higher than anticipated. She emphasized that future coffee houses must deliver strong AUVs and returns, with a more complete financial algorithm to be provided at the investor day.

Sara Senatore of Bank of America questioned what drove the sequential transaction improvement if operational changes are still nascent, and asked what food innovation lessons from Canada can be applied to the U.S.

Answer

Chairman & CEO Brian Niccol attributed the improvement to both better operations, as leaders responded to clear service standards, and more effective marketing, which boosted non-rewards and non-discounted transactions. Regarding food, he acknowledged Canada's success and stated that the company will improve its process for reapplying successful innovations from global markets, like Canada and the UK, to the U.S.

Sara Senatore from Bank of America questioned the primary driver of the sequential improvement in transactions, suggesting marketing as a possibility, and asked about applying lessons from Canada's successful food innovation to the U.S.

Answer

CEO Brian Niccol attributed the improvement to both better operations and more effective marketing, which has successfully increased transactions among non-discounted rewards members and non-rewards customers. Regarding food, he acknowledged Canada's success and stated the company will improve its process for reapplying successful innovations from global markets, like Canada and the UK, to the U.S.

Sara Senatore questioned the significant margin pressure from labor investments in North America, asking if the fundamental economics of the stores have changed, given that the earnings recovery appears slower than in past turnarounds.

Answer

Brian Niccol, Chairman and Chief Executive Officer, clarified that labor had been removed from stores in recent years under the incorrect assumption that equipment could compensate. The current investments are a correction. He added that the company is now building back higher-quality, non-discounted transactions, particularly with non-Rewards customers, which he believes will set the foundation for future margin growth.

Sara Senatore inquired about the strategy of reallocating resources, such as shifting funds from ineffective promotions to initiatives like eliminating non-dairy upcharges and investing in linear TV, and asked for clarification on certain non-GAAP adjustments.

Answer

CEO Brian Niccol confirmed the strategy is to redirect funds from underperforming activities to initiatives with higher potential returns. He highlighted the ongoing work to extract supply chain efficiencies as a source of funding for these investments. The goal is to build ongoing capabilities rather than pursuing one-time savings.

Sara Senatore inquired about the chicken sandwich platform renovation, its current mix, and its potential impact on traffic and overall menu quality perception. She also asked about the differences and expected pace of the Maggiano's turnaround compared to Chili's.

Answer

CEO Kevin Hochman clarified that while chicken sandwiches are not a large mixer currently, they represent a significant opportunity due to the popularity of boneless fried chicken, and the plan is more about adding flavors and advertising. For Maggiano's, he noted similar challenges to Chili's (facilities, deferred maintenance, brand positioning) but expects a slower, less dramatic turnaround due to its smaller scale and lack of national advertising, aiming for stabilization and growth over time.

Sara Senatore asked about the sales mix potential of the chicken sandwich platform relative to other renovated items, and whether future renovations are expected to drive traffic or primarily enhance menu quality perception. She also inquired about differences in the Maggiano's turnaround compared to Chili's, considering the demand environment and competitive landscape.

Answer

Kevin Hochman, President and CEO of Brinker International, clarified that while chicken sandwiches are not currently a large mixer for Chili's, they represent a significant opportunity given their popularity in the broader restaurant industry, with plans to add flavors and advertise them. For Maggiano's, he noted similar challenges to Chili's (e.g., deferred maintenance) but a slower, less dramatic turnaround due to its smaller scale and lack of national advertising, focusing on returning to its core positioning of abundant, scratch-made Italian-American favorites.

Sara Senatore asked if the observed macro weakness was affecting higher-income customers, given North Italia's polished casual positioning, and whether the increased competition was primarily from other polished casual chains or independents, noting mixed reads on smaller operators.

Answer

Matt Clark, EVP and Chief Financial Officer, suggested that North Italia's midweek lunch pressure might indicate trade-down from insulated consumers based on sentiment, even if their income remains stable. He described the competitive environment as twofold: an all-time high in deals and discounts, and expanded capacity due to off-premise dining, which makes measuring competition more complex. He added that independents are likely facing a harder time.

Sara Senatore sought clarification on the operating environment, noting it seemed healthier than previous cautious commentary suggested. She also asked for details on Flower Child's profitability, unit economics, and its potential to become a more significant growth driver.

Answer

Matthew Clark, Executive VP & CFO, characterized the environment as very steady for their brands, allowing them to weather conditions strongly, though they maintain a prudent outlook. He highlighted Flower Child's exceptional performance, with mature unit margins reaching 20.4% and AUVs approaching $5 million, yielding cash-on-cash returns in the mid-30s. He affirmed it will play a bigger role going forward.

Sara Senatore asked about the implications of Sysco's strong top-line performance and in-line Q2 guidance without a full-year raise, specifically inquiring if investments will moderate and flow through later this year or next year. She also asked about market share targets for broadline versus specialty businesses.

Answer

Kenny Cheung, CFO, stated that Sysco is playing the long game, investing in the business and seeing returns. He cited Salesforce hires (750+ people) climbing the productivity curve and 10 new facilities as key investments, expecting continued strides in operating income, gross profit, and volume. Kevin Hourican, Chair and CEO, clarified that Sysco has gained market share each of the past six years, aiming to take share in both national and local this year. He identified specialty as the area for outsized share gains, seeing $10 billion in growth from this segment, driven by product availability, expert sales colleagues, and a differentiated service model.

Sara Senatore questioned why, despite encouraging top-line performance, Q2 guidance was in line and the full-year guidance was not raised, asking about the moderation and flow-through of Sysco's investments. She also inquired about Sysco's market share strategy, specifically whether it aims to reverse previous ground ceded and if there are target market shares for broadline versus specialty segments.

Answer

Kenny Cheung, CFO of Sysco, explained that Sysco is playing the long game with investments, seeing incremental returns from past investments. He highlighted the salesforce (750+ hires) climbing the productivity curve, driving new account growth and penetration, which contributed to Q1's outsized growth. He also mentioned 10 new facilities (7 U.S., 3 international) with robust pipelines, expecting strides in USFS operating income, gross profit, and volume. Kevin Hourican, Chair and CEO, clarified that Sysco has taken market share in total for the past six years, and this year aims to take share in both national and local segments. He identified specialty businesses (produce, meat, equipment & supplies, Asian, Italian foods) as key areas for outsized share gains, driven by product availability, expert sales colleagues, and a differentiated service model. He noted that specialty is a $10 billion business with potential for another $10 billion in growth.

Sara Senatore asked about Darden's investment strategy for top-line growth, specifically regarding marketing and delivery fee subsidies, and their impact on margins. She also inquired if the reference to 'less snacking or munching' related to GLP-1 drugs or a broader consumer shift towards experiences.

Answer

CEO Rick Cardenas confirmed that Darden is increasing marketing activity, utilizing cost savings to fund more TRPs and testing connected TV for other brands, believing it drives traffic without deep discounting. He acknowledged that the 'million free deliveries' campaign impacted margins. Regarding consumer behavior, he suggested it's a mix of GLP-1 users eating smaller portions and consumers prioritizing casual dining for value and connection over frequent snacking.

Sara Senatore inquired about Darden's investment strategies for top-line growth, specifically regarding marketing spend and the coverage of delivery fees. She also asked if the reference to 'less snacking or munching' was related to GLP-1 drugs or a broader consumer shift towards prioritizing good dining experiences.

Answer

Rick Cardenas, President and CEO, explained that Darden is increasing marketing activity (more TRPs, digital tests) with cost savings offsetting the growth in spend, and confirmed the 'million free deliveries' campaign impacted margins. Regarding consumer behavior, he suggested it's a bit of both: GLP-1 users may eat smaller portions or less often but dine out more in casual dining, and lower-end consumers might have fewer resources for frequent, smaller outings.

Sara Senatore asked about Darden's investment strategy for top-line growth, specifically regarding marketing spend and potential subsidization of delivery fees. She also inquired if the comment about 'less snacking or munching' was related to GLP-1 usage or a broader consumer shift towards more meaningful dining experiences.

Answer

Rick Cardenas, President, CEO & Director, confirmed increased marketing activity, leveraging cost savings to fund more TRPs and digital tests, and acknowledged that the 'million free deliveries' campaign impacted margins. He explained that 'less snacking' is a combination of GLP-1 users eating smaller portions and dining out less frequently (but more in casual dining), and lower-income consumers having fewer resources for frequent eating out.

Sara Senatore from Bank of America asked about the pressures in the fine dining segment and the strategic rationale behind the Bahama Breeze decision, questioning if it related to managerial span of control. She also requested further details on consumer demographic trends, particularly by income level.

Answer

President & CEO Rick Cardenas explained that fine dining's softness is due to post-COVID consumer behavior shifts, not internal resource constraints, and that Bahama Breeze no longer meets the portfolio's strategic criteria for investment. CFO Raj Vennam detailed that casual dining is seeing growth across most income cohorts except those below $50k, while fine dining is experiencing pullbacks from households under $150k but stabilization from those above that level.

Sara Senatore asked for the strategic rationale behind bringing back Olive Garden's 'Buy One, Take One' promotion and inquired whether the new, smaller restaurant prototypes are generating sales volumes consistent with their larger counterparts.

Answer

President and CEO Ricardo Cardenas explained that the 'Buy One, Take One' promotion aligns with their current strategy by using core menu items, avoiding deep discounts, and reinforcing Olive Garden's brand equity of abundance. Regarding the new prototypes, he confirmed they are performing at or above expectations and are capable of achieving similar sales and traffic volumes as legacy stores, thanks to optimized layouts and kitchen designs.

Sara Senatore asked about the consumer environment, potential trade-down between Darden's brands, and whether Cheddar's Scratch Kitchen has reached an inflection point for accelerated unit growth.

Answer

Executive Ricardo Cardenas noted that consumer sentiment is improving, particularly among middle-income guests, which benefits casual dining. He acknowledged some trade-down from fine dining to brands like LongHorn is possible. Regarding Cheddar's, he avoided the term 'inflection point' but expressed confidence in building the unit growth pipeline, supported by a successful new, lower-cost prototype.

Sara Senatore sought clarification on whether the older age cohort was less affected by recent traffic declines. She then asked how Cracker Barrel plans to evolve the brand and potentially shift its customer base if remodeling and rebranding are no longer the primary methods, given past comments about the company not keeping pace. Finally, she inquired about the G&A expense, asking why it was a 'good guy' again this quarter.

Answer

SVP and CFO Craig Pommells confirmed that while all cohorts saw impacts, the over-65 cohort held up best. President and CEO Julie Felss Masino explained that the multi-year plan has always centered on food and experiences guests love, with brand and remodels being small components. She reiterated a renewed focus on food and guest experience, leveraging feedback, menu evaluation, and successful initiatives like the loyalty program and pricing. Craig Pommells stated that G&A is continuously managed as part of broader cost-saving efforts, with the team actively seeking opportunities to reduce spending effectively.

Sara Senatore sought clarification on whether the older age cohort was less affected by recent traffic declines. She also asked for more details on Cracker Barrel's strategy for evolving the brand and bringing it forward, if remodeling and rebranding are no longer the primary methods, and how the company plans to potentially shift or broaden its customer base. Additionally, she inquired about the G&A performance, specifically why it was favorable this quarter and if there were any timing shifts.

Answer

Craig Pommells, SVP and CFO, confirmed that while all age cohorts are impacted, the over-65 cohort has held up best. Julie Masino, President and CEO, reiterated that the multi-year plan's core focus, based on extensive research, is on 'food and experiences guests love,' with brand/logo and remodels being only small workstreams. She stated the renewed focus is on doubling down on food and experience improvements, incorporating recent feedback. Craig Pommells added that G&A is continuously managed as part of broader cost savings efforts, with the team actively seeking opportunities to reduce spending and deploy dollars effectively, contributing to the favorable performance.

Sara Senatore sought clarification on whether the older age cohort was less affected by recent traffic declines compared to younger demographics. She then asked, if remodels and rebranding are not the primary means of evolving the brand, what specific strategies Cracker Barrel will employ to bring the brand forward and potentially shift its customer base, in light of previous comments about the company not keeping pace with changes.

Answer

Craig Pommells (SVP & CFO) confirmed that while traffic impacts are broad-based, the over 65 cohort has indeed held up best. Julie Felss Masino (President & CEO) reiterated that the multi-year plan's core focus, informed by extensive research, has always been on 'food and experiences guests love.' She emphasized that brand and remodels were only small workstreams, and the company is now 'doubling down' on improving food quality and the overall guest experience, leveraging successful elements of the plan like the loyalty program and pricing strategies, while incorporating recent guest feedback.

Sara Senatore of Bank of America asked for context on the negative traffic trends despite management's optimism, questioning if certain transactions are being intentionally shed. She also inquired about traffic performance across different demographic groups.

Answer

SVP and CFO Craig Pommels clarified that Q3 traffic was skewed by a particularly challenging February and that trends improved significantly as the quarter progressed and into Q4. He noted that performance was steady across demographic cohorts. President & CEO Julie Felss Masino characterized the quarter as a 'speed bump' in a three-year plan, expressing confidence in the long-term underlying trends.

Sara Senatore from Bank of America questioned why Q2 traffic initiatives didn't seem to work as expected, given the marketing spend, and asked if the pressure on urban white-collar workers persists.

Answer

Co-Founder, CEO & Director Jonathan Neman clarified that the significant protein portion increase was a Q3 initiative, not Q2, and that sequential improvement has been observed since July. He noted a new marketing head will join in September to review the marketing mix. CFO Mitch Reback added that Q2 advertising spend was allocated more toward local stores versus national brand building. Neman confirmed that pressure in the urban Northeast has persisted, consistent with broader industry trends.

Sara Senatore of Bank of America asked about geographic performance disparities, specifically noting Washington D.C.'s weakness in April, and questioned how a niche collaboration like COTE Korean Steakhouse would broaden the brand's appeal.

Answer

CFO Mitch Reback confirmed a noticeable negative change in Washington D.C.'s performance around early April, in addition to the previously mentioned lingering impacts from wildfires in Los Angeles. CEO Jonathan Neman explained that collaborations like COTE are about introducing bold new flavors and building culinary credibility, which drives discovery and reinforces the brand's premium, innovative positioning, rather than relying on the collaborator's name recognition alone.

Sara Senatore asked for clarification on future capital expenditure levels under the new capital-light model and posed a broader strategic question about the long-term vision for Krispy Kreme, noting that the current turnaround seems to reverse previous growth initiatives like the QSR partnership.

Answer

CFO Raphael Duvivier confirmed that CapEx as a percentage of revenue is expected to decrease significantly under the new capital-light model, leading to higher cash conversion and positive cash flow in the second half of the year. President & CEO Joshua Charlesworth added that Krispy Kreme remains a growth story, with franchising now established as the most capital-efficient model for international expansion. He emphasized that the company will continue to leverage a multichannel model in the U.S., but with a renewed focus on ensuring partnerships are sustainably profitable.

Sara Senatore from Bank of America questioned the reasons for the lowered full-year EBITDA guidance while revenue guidance was maintained, asking if McDonald's rollout costs were higher than anticipated. She also inquired about the timeline for realizing benefits from the planned shift to third-party managed delivery.

Answer

CFO Jeremiah Ashukian clarified the EBITDA guide was updated due to higher logistics costs, an intentional pull-forward of McDonald's start-up costs, and the Insomnia Cookies divestiture. CEO Joshua Charlesworth and CFO Jeremiah Ashukian added that while they are currently using an in-house model, they have launched an RFP for third-party delivery partners, which could and likely will be part of the McDonald's rollout, to improve efficiency.

Sara Senatore from Bank of America asked for clarification on whether strong results from Burger King remodels are driving franchisee demand for more comprehensive renovations and sought Patrick Doyle's perspective on Popeyes' competitive position in the chicken segment.

Answer

CFO Sami Siddiqui confirmed franchisees are increasingly leaning into the full 'Sizzle' remodels, which are yielding even better uplifts than the mid-teen average. Executive Chairman Patrick Doyle addressed Popeyes by stating the key to growth is improving store-level operations, pointing to the brand's international success as a proof point. CEO Josh Kobza added that a clear plan is in place to modernize the entire Popeyes system with the 'easy to run kitchen' format.

Sara Senatore asked about the consumer backdrop, specifically if RBI is observing a broadening of weakness from low-income to middle-income consumers. She also questioned if there is a trade-off at Tim Hortons, where stabilizing unit growth might be causing a slowdown in same-store sales, citing strength reported by other QSRs in Canada.

Answer

CEO Josh Kobza stated that RBI's data does not show a significant directional difference in performance between income cohorts in the U.S. He did note a dip in consumer confidence in Q1 that correlated with market softness, but has seen some recovery in Q2. Regarding Tim Hortons, Kobza asserted there is no evidence of a trade-off between unit growth and same-store sales, expressing high confidence in the brand's continued performance and pointing to strong momentum returning in Q2.

Sara Senatore asked why Burger King's franchisee EBITDA was stable on just 1% comp growth and what comp is needed for leverage. She also asked about offsetting factors to the strong growth in certain Tim Hortons categories.

Answer

CFO Sami Siddiqui explained that higher commodity costs at Burger King U.S. offset some flow-through. CEO Joshua Kobza noted that for Tim Hortons, underperformance in hot beverages due to warmer weather offset strength in other areas. Executive Chairman Patrick Doyle added that improved procurement and stronger operators are also bolstering franchisee profitability.

Sara Senatore questioned if Burger King U.S.'s strong October was due to broad category improvement or promotional-driven share shifts, and asked about the path to franchisee EBITDA goals. For Tim Hortons, she asked if its performance represented market share gains or simply holding steady against strong competitors.

Answer

CEO Josh Kobza attributed BK's success primarily to effective marketing like the Addams Family tie-in, though he noted some positive macro signs. Executive Chairman Patrick Doyle added that long-term confidence comes from fundamental improvements in service and remodels, not just promotions. For Tim Hortons, Kobza pointed to strong breakfast food sales growth (+5.8%) as evidence the brand is performing well across dayparts and gaining ground.

Sara Senatore from Bank of America asked if achieving the $300,000 franchisee profit target for Burger King U.S. relies more on volume growth or self-help opportunities, and also requested clarification on the drivers for the reduced G&A guidance.

Answer

CEO Josh Kobza explained the path to $300k profitability is a mix of sales growth (from remodels, marketing) and margin improvement (from smarter discounting, labor efficiency, and technology). CFO Sami Siddiqui clarified the G&A guidance reduction was primarily due to lower stock-based compensation expense, not major headcount changes.

Sara Senatore of Bank of America questioned the four-wall economics of franchisee restaurants and sought clarification on whether the softer Q3 carryout business reflects a stressed consumer or company-specific issues.

Answer

President & CEO Todd Penegor explained the softer Q3 carryout start is within their control and can be adjusted with messaging. EVP & CFO Ravi Thanawala added that transaction-oriented franchisees are performing well, and investing in winning transactions now will pay dividends. He noted that from 2020-2024, the average corporate store generated over $820,000 in four-wall EBITDA, reinforcing the model's strength.

Sara Senatore of Bank of America asked for clarification on the drivers of international growth, specifically questioning if the mention of 'greater penetration' signaled market saturation.

Answer

President and CEO Todd Penegor and CFO Ravi Thanawala clarified that 'penetration' refers to focusing on and growing within nine key countries, not saturation. Thanawala emphasized there is significant runway in these markets, which will account for 50% of gross development. He highlighted strong recent performance, with the U.K. up over 2% in comps and the Middle East up almost 20%, indicating a focus on growing the base, not brand exhaustion.

Sara Senatore asked whether recent transaction improvements were driven by macro factors or company initiatives, and questioned the strategy for first-party versus third-party channels given the value of customer data.

Answer

President and CEO Todd Penegor attributed the improvement to a balance of both company actions and a modest consumer rebound. He stressed that the best experience and deals must be on first-party channels, hence the focus on revamping the loyalty program. CFO and EVP, International Ravi Thanawala provided proof points, including positive carryout trends and successful loyalty tests that drove first-party transactions.

Sara Senatore of Bank of America asked for clarification on pricing and mix within the comp, and questioned whether the maturation of new store vintages fueling transaction growth was a general curve or specific to recent, lower-AUV openings benefiting from advertising.

Answer

CFO Josh Guenser confirmed a slight negative mix offset from items per transaction, a historical trend. He then clarified that the strong performance is coming from all new vintages, both recent and those from several years ago, though it is even stronger in the newest cohorts. CEO Christine Barone added that paid marketing is intentionally focused on these newer markets to build awareness and drive trial, which then feeds into the Dutch Rewards program.

Sara Senatore asked for clarification on mobile ordering, questioning if it drives a higher check size along with frequency. She also asked if the program's focus on the morning daypart is causing any shift in the company's customer demographics.

Answer

CEO Christine Barone clarified that mobile orders typically have a slightly lower items-per-transaction count, consistent with morning commuters, but noted this could change as food is added. She stated that they are not currently seeing any demographic shifts but will continue to monitor this, reiterating that the brand appeals to a wide range of customers.

Sara Senatore asked for confirmation on pricing levels, inquired about the strong new unit productivity, sought early reads on the Florida market, and followed up on the impact of sales transfer.

Answer

CFO Josh Guenser confirmed approximately 4 points of price in Q4 and a net 3% roll-off in 2025. CEO Christine Barone attributed high new unit productivity to very strong openings in markets like Southern California and described the initial customer reception in Florida as very exciting. Josh Guenser reiterated that the company remains comfortable with its previously communicated expectations for sales transfer.

Sara Senatore from Bank of America asked what specific factors drove the outperformance against expectations in Q3 and requested more detail on the increased paid advertising investment.

Answer

CEO Christine Barone attributed the strong results to the combined positive effects of paid advertising, a surge in Dutch Rewards registrations from new customers, and the accelerated rollout of mobile order. CFO Josh Guenser clarified that the advertising push involved both an increase in total dollar spend and more effective, targeted segmentation efforts.

Isaiah, on for Sarah Senatore of Bank of America, asked about the decision to reduce advertising spend and sought clarity on labor cost pressures, including the impact of changing server-to-table ratios.

Answer

CEO Mike Spanos clarified that advertising spend was not reduced but made more efficient by cutting non-working marketing and focusing on high-ROI channels. On labor, he explained the server ratio change is a cost-neutral reallocation, not a new investment. CFO Michael Healy added that wage inflation has been stable at around 4%.

Sara Senatore questioned if there were any offsets to the expected margin pressure from reinvesting in value and labor, such as savings from menu simplification. She also asked about the long-term outlook for the company's structural restaurant-level margin rate and overall P&L.

Answer

CEO Mike Spanos clarified that menu simplification savings would be repurposed into quality initiatives rather than providing a major funding source. Instead, he pointed to G&A reductions and cost-saving initiatives identified with a third-party consultant as the primary ways to fund investments. He acknowledged that margins will face near-term pressure during the turnaround, with the ultimate goal of driving consistent traffic to offset the investments over time.

Sara Senatore of Bank of America sought clarification on the shift from relocations to remodels and questioned if the restaurant margin mix would change, with potentially higher cost of goods due to value investments.

Answer

CEO Mike Spanos clarified that relocations 'are still very much part of the program' alongside remodels. CFO Michael Healy addressed margins, stating that COGS should remain 'relatively stable' as productivity initiatives, primarily from the supply chain, are expected to offset cost pressures from value offerings. He noted labor would likely see more pressure from inflation.

Sara Senatore questioned the commentary about a soft demand environment, noting that industry data suggested improvement since July, and asked about the opportunity to improve the managing partner model, which is already considered effective.

Answer

CFO Michael Healy clarified that while the industry saw some rebound from a July low, their prior guidance had optimistically assumed that their performance relative to the industry would continue to improve, an assumption that has now been flattened. CEO Mike Spanos affirmed his support for the managing partner model and its aligned economic interests, adding that feedback from partners suggests the model should also incentivize sales and profit growth, not just cash flow, to drive retention and a great guest experience.

Sara Senatore of Bank of America inquired about the unit economics of new, smaller-format restaurants, including the potential impact on margins and ROI, and asked if the company gets credit for its high-value COGS in terms of traffic.

Answer

CEO Michael Osanloo explained that new, lower-cost restaurant formats are designed for attractive cash-on-cash returns, with operational efficiencies from new kitchen layouts potentially offsetting any margin pressure from higher rent in build-to-suit models. He affirmed the company is proud of its high COGS as a value driver for guests and believes this builds loyalty over time, even if immediate traffic gains aren't apparent.

Sara Senatore from Bank of America sought clarification on the strategy to manage the new store sales curve in Houston, asked about the confidence in accelerating unit growth to 12-15% next year, and inquired about the future pricing environment.

Answer

CEO Michael Osanloo confirmed the goal is to mitigate the volatile sales curve seen in early new markets. He expressed high confidence in the 2025 growth target due to a strong pipeline of signed leases and available GMs. CFO Michelle Hook added that pricing will be used moderately to offset inflation, as the company believes it retains pricing power and provides strong value.

Sara Senatore asked for two clarifications: whether the discounted pricing for ByteConnect is a franchisee subsidy, and whether Taco Bell's share gains from fast-casual imply it is not taking share from traditional QSR.

Answer

CFO Chris Turner and CEO David Gibbs addressed the questions. Turner clarified that ByteConnect is not a subsidy; it is priced lower because it was developed internally at low cost, creating a win-win for Yum! and its franchisees. Gibbs added that while the trade-down from fast-casual is a notable trend, Taco Bell's robust performance indicates it is taking market share from the entire QSR industry, not just one segment.

Sara Senatore of Bank of America asked if Uber sales were still growing alongside the DoorDash rollout and questioned the company's pricing and margin philosophy, specifically if the focus on profit dollars over margin rates necessitates faster revenue growth.

Answer

CFO Sandeep Reddy confirmed that Uber's performance is tracking to expectations and the primary focus remains on franchisee profit dollars, which is enabled by their scale advantages in advertising and supply chain. CEO Russell Weiner outlined four core pricing principles: consistency, maximizing franchisee profitability, aligning with consumer income growth, and delivering 'renowned value' beyond just price.

Sara Senatore sought clarification on the comment that persistent macro pressure could threaten the U.S. sales outlook, asking if the environment has softened and what level of improvement is needed to achieve the 3% comp guide.

Answer

Chief Executive Officer Russell Weiner noted the guidance reflects the back-half loaded timing of initiatives. Chief Financial Officer Sandeep Reddy clarified that the guidance already assumes a tough macro environment; the risk is if there is a *further* deceleration. Weiner added that these are QSR-wide headwinds and Domino's continues to gain market share.

Sara Senatore from Bank of America sought clarification on whether the weakness from the lower-income consumer was due to aggregate spending pressure or increased competition. She also asked how to frame Domino's market share gains—as a consistent dollar increase annually or as an accelerating gain—given the slow-growing pizza category.

Answer

CEO Russell Weiner suggested the low-income pressure was likely a combination of both consumer spending softness and heightened competitive value promotions in August. CFO Sandeep Reddy addressed the market share question by reiterating the 'Hungry for MORE' targets of 3% annual comps and 175 new stores, which implies significant market share gains that are calibrated to the rate achieved from 2015 to 2023. Weiner added that the fragmented nature of the pizza category, with many independents, provides a long runway for share growth.

Sara Senatore from Bank of America questioned the rationale for the planned restaurant closures given strong new unit performance and asked how the company plans to manage the costs of its 'Surprise and Delight' guest program more efficiently.

Answer

CFO Mel Hope explained that the closures are a normal part of managing a large portfolio, often related to expiring leases in trade areas that have shifted over time. CEO Chris Tomasso added that closures can be strategic to optimize market penetration. Regarding 'Surprise and Delight,' Tomasso confirmed the program will continue and will be managed appropriately, emphasizing its value in building long-term customer loyalty.

Sara Senatore questioned First Watch's value strategy, asking if customers recognize value without deep discounts and if lower relative inflation presents a competitive advantage. She also asked about the drivers behind the turnaround in third-party delivery traffic.

Answer

CEO Chris Tomasso noted that marketing tests confirmed that messaging around core menu value resonates with consumers. CFO Mel Hope added that while their scale secures egg supply, they still pay a premium, limiting its use as a value message. He clarified the third-party delivery traffic improvement was due to a new partnership arrangement that increased visibility on delivery platforms.

Sara Senatore asked if the decision to redeploy advertising spend towards field operations might have negatively affected performance, given the importance of share of voice. She also requested a benchmark for QSR burger traffic from the previous year.

Answer

Ken Cook, CFO, explained that QSR burger traffic has been in a low-single-digit decline for several years, but Q1 industry traffic fell mid-single-digits, which was worse than anticipated. He argued that since Wendy's maintained its traffic and dollar share, the shift in advertising spend did not have a significant negative impact. He added that the company believes enhancing the customer experience will ultimately drive frequency and strengthen the brand's value proposition.

Sara Senatore of Bank of America inquired about any geographic or market-type themes behind the recent store closures and whether future unit growth is focused on densifying existing markets or following population shifts.

Answer

CEO Kirk Tanner clarified that the closures are not concentrated in any single geography but are spread across the U.S., targeting outdated restaurants to strengthen the overall system. He affirmed there is still significant runway for growth in the U.S. and internationally, with new builds delivering much higher AUVs ($2M) than the closed stores (~$1.1M).

An analyst on behalf of Sara Senatore at Bank of America asked why comps slowed in March while the industry recovered and why the company's higher-income consumer base seemed less insulated in Q1.

Answer

CEO Robert Lynch and CFO Katherine Fogertey corrected the premise, stating February was the weakest month, with trends improving in March and April. They argued their positive comps show they *were* relatively insulated compared to competitors. They specified that 75% of the quarter's headwinds were concentrated in NYC, LA, and DC due to weather and tourism, while other markets performed very well, some with mid-to-high single-digit comps.

Sara Senatore of Bank of America asked for clarification on the financial impact of recent store closures and the reason for a slight reduction in the licensed store opening forecast.

Answer

CFO Katie Fogertey confirmed the 9 closed Shacks generated $17 million in trailing sales and were loss-making, so their closure provides a benefit to the restaurant profit margin line. CEO Rob Lynch explained the licensed forecast adjustment was due to timing shifts on a few openings from Q4 to Q1, and noted that despite geopolitical headwinds, China and the Middle East remain fast-growing markets.

Sara Senatore of Bank of America asked if achieving the $300,000 franchisee profit target at Burger King U.S. relies on volume growth or self-help, and also requested color on the reduction in G&A guidance.

Answer

CEO Josh Kobza explained the path to $300k profitability involves a mix of sales growth (from remodels, marketing, ops) and margin improvement (from better discounting, labor efficiency, and technology). CFO Sami Siddiqui clarified the G&A guidance reduction was primarily due to lower stock-based compensation expense, not significant headcount changes.

Sara Senatore from Bank of America asked about the path to $300,000 franchisee profitability at Burger King U.S., and for clarification on the drivers behind the reduced G&A guidance.

Answer

CEO Josh Kobza outlined that reaching $300k profitability involves a combination of sales growth (from remodels, marketing, operations) and margin improvement (from labor efficiency and technology). CFO Sami Siddiqui clarified the G&A guidance reduction was primarily due to lower stock-based compensation expense, not major headcount changes.